*Fiem Industries Q2FY22 Concall Update – Nirmal Bang Securities*
*Outlook: Positive in long term*
• Co primarily supplies automotive lighting (70% mix), rear view mirrors (10%), plastic moulded parts (12%) and others to 2W industry (96% of sales).
• LED lighting mix is at ~39%, same as in FY21. However it is likely to increase by 3-4% annually. Faster adoption of EVs will also play a part in the increasing mix of LED lighting as EV 2Ws will have only LEDs.
• Lighting kit value (head/tail/blinker) per vehicle for conventional lamp costs Rs 800-1500 and for LED lamp costs 2000-5500.
• At industry level, the LED mix in lighting is the same for scooters & MCs at around 40%.
• Realisation of LED lights supplied to ICE and EV are the same.
• Co sales increased by 12% YoY, in line with its OEM clients.
• Key OEM clients include: Honda (34% mix), TVS (23%), Yamaha (17%), Suzuki (8%) and others.
• Share of Yamaha has increased the most among all clients in last few years as co is now supplying for 7-8 programs. Yamaha has another 7 programs under development which will drive their mix further in coming years. Much of it also came from Yamaha Subsidiaries outside of India.
• Co is in talks with Hero Moto, Tata Motors, Ashok Leyland and other OEMs to convert them as clients.
• Received LED lighting orders from Harley Davidson for US & Thailand.
• Margins will be maintained at current levels of 12-13% in future. OEMs take 6-9 months to adjust pricing for compensating increase in RM prices.
• Co will only focus on 2W Auto lighting and not diversify in PV or non-auto areas.
• It will take 4 months to increase capacity by 25% in future as co has enough land. Further, co is planning capex of Rs. 75-100 Cr spread over 2 years.
*EV Highlights*
• Co added Ola Electric as its client during Q1. It will be the sole supplier for Ola’s newly launched scooter. Hosur plant in South is close to Ola’s factory.
• Okinawa – co supplies all products and is also the sole supplier.
• Ampere, Hero Electric, Electrotherm – co is supplying few parts.
• Co is in talks with other EV 2W cos as well.
• *EV volumes should witness good increase in FY23 as per management.*
Stock is trading at P/E of 18.3x TTM EPS